Comparing Different Types of Life Insurance By Jeremy Vohwinkle Updated October 16, 2016 Navigating the life insurance landscape can be tricky. You are sure to encounter a number of different policies and terms such as whole life , term life, cash value , variable life, and much more. How can you make sense of all the different types of policies and know that you’re making the best choice? Here’s a quick breakdown of the most common types of insurance policies and the pros and cons of each. Term Life Insurance Term life is exactly what it sounds like. You purchase life insurance for a specific term or set amount of time. You pay premiums for the entire length of the term and once the term is up, your death benefit is gone. Term life does not have a cash value component so your entire premium is simply used to keep the policy active. Once the term is up, you stop paying premiums and the policy expires. This is what makes term life one of the most inexpensive life insurance policies.

But even term life is broken down into a few different categories: Level Term – Your premium and death benefit remains the same for the entire length of the term, whether that is 10, 20, or even 30 years. Annual Renewable Term – The death benefit remains unchanged throughout the term, but the contract renews annually, usually with an increase in premium each year. Initially, premiums may be less than in a level term policy, but over time it can become more expensive. Decreasing Term – Here, the death benefit decreases each year while the premium remains the same. The policy ends when the death benefit reaches zero. Advantages of Term Life Insurance Term life policies are usually far less expensive than the whole, universal, or variable life insurance. Term life also has a very specific coverage period—typically in terms of 10, 15, 20, 25, and 30 years. This allows you to only buy as much coverage as you need. For example, if you’re only concerned about life insurance while you have dependents at home or a mortgage to pay, you can plan out how long and how much coverage you need.

Disadvantages of Term Life There is no cash value component of the policy. Your premiums strictly go towards the policy and do not earn interest or otherwise accumulate. And having a specific term can also be a drawback. If you purchase a 20-year term policy and after 20 years decide you’d like to extend your coverage, you may need to undergo proof of insurability and could be denied additional coverage or need to renew at a significantly higher premium. Universal Life Universal life insurance builds on term life and adds a cash component. Here, instead of just selecting a specific term and putting 100% of your premium towards the policy, part of your premium will actually go into a cash account in the policy. This cash account earns interest and accumulates tax-deferred. Advantages of Universal Life Universal life insurance provides additional flexibility. Because it has a cash component you could actually temporarily stop making premium payments as long as the cash value can cover the cost of insurance. In addition, you may also be able to increase or decrease the death benefit over time. Also, you can usually borrow against the policy in the form of a loan. Disadvantages of Universal Life Universal life is more expensive than term life.

While some of that added cost will be going into the account in the form of building cash value, the rates you earn on that money may not be the best-going rates. This is why many financial professionals recommend buying term and investing the difference. This allows you to still purchase a death benefit while having the flexibility to invest the difference anywhere you choose. Variable Universal Life Insurance Variable life insurance is very similar to universal life with one major difference. With this type of policy you aren’t earning a specific rate of interest in a cash-value fund, but instead, you can invest this portion in a variety of different investments like mutual funds . So, you get much more control and can choose where to invest the cash value portion. Advantages of Variable Life You’re still guaranteed the minimum death benefit as long as you keep up with the minimum premium. You also have the flexibility to invest the cash value portion in a variety of investment vehicles. If you make wise investment decisions you can take advantage of significant tax-deferred earnings on those investments. Disadvantages of Variable Life By investing part of your policy in possibly risky investments , if the market turns south and you lose a lot of money, you’re putting your policy in jeopardy.

A significant drop in account value could force you to pay additional premiums just to keep the contract in force. In addition, the expenses associated with the investments in variable universal life may be significantly higher than you might pay elsewhere. Whole Life Insurance As the name implies, whole life is meant to insure someone for their whole life. Like universal life , whole life has a cash value component. In most cases, in a whole life policy, the premium and death benefit are fixed. Advantages of Whole Life There are no surprises with whole life. You have a guaranteed premium, interest rate , and death benefit for the life of the policy. The cash value also grows tax-deferred and also typically allows for withdrawals and loans against the policy. Disadvantages of Whole Life Whole life is generally more expensive than both term and universal policies. This is largely due to the added guarantees that come with whole life. Also keep in mind that the policy is not flexible. If you determine you want more coverage or would like to increase or decrease your premium, which probably isn’t an option. Finally, the interest earned on the cash-value account may be less than you could obtain elsewhere.

Choose Your Life Insurance Carefully As you can see, there are a number of options available and there isn’t a single right answer for everyone and every situation. If you take the time to learn what each type of policy offers you can be sure to get an insurance policy that’s right for you and not just what someone is trying to sell you. Continue Reading 3 types of permanent life insurance 3 types of permanent life insurance See all stories Â» No one has ever claimed that life insurance is easy to understand. Term insurance is the most straightforward, offering the purest protection relatively inexpensively for people in most stages of life . But some cases, it may make sense to pay for permanent insurance, which is far more expensive and complex. If you're considering purchasing a policy, it's a good idea to know what you're getting into. Here is an introduction to the three main types of permanent insurance: whole life, universal and variable life. Whole life Whole life insurance is the most basic type of permanent insurance. It has a savings component and a death benefit. The savings component is called the cash value.

"Whole life is more expensive than term insurance, but it has more built-in guarantees with regard to your death benefit -- the guarantee of a cash value at a future date. Because of all those guarantees, you have a higher ongoing cost or premium," says Russell Fox, a Certified Financial Planner with Apex Wealth Management Group in Oxnard, Calif. Universal life insurance "Universal life insurance is a blend between whole life and term. It does have cash value accumulation, and it can be tied to a fixed interest rate like a CD that will adjust annually," says Fox. Because it has an investment component, universal life is a more aggressive approach than whole life, but it generally offers fewer guarantees than whole life. Because of that, it can be less expensive. Universal life offers consumers some flexibility in the amount they pay toward the premium, and they can also use the savings portion toward paying for the insurance coverage. Variable life insurance A third main type of permanent life insurance, variable life insurance, offers life insurance protection for the duration of your life with more investment options, including equities. Its structure is like that of universal life, but the value of your policy can go up or down with the value of the underlying investment choices.

After a particularly brutal bear market, like the most recent one, these types of policies look extremely unattractive. "You can end up in a double negative situation, where your investments are losing money and the cash value is being eroded by premium payments. Without adding more money on top, the policy could lapse," says Fox. "You do have permanent coverage for the rest of your life, as long as you keep the policy with an adequate amount of cash value in it. Then it can stay in force for the rest of your lifetime. You have to consistently monitor it and review it to make sure that it is still on track and a healthy plan," he says. What are the principal types of life insurance? | III Español What are the principal types of life insurance? There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life. Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

Term Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions. There are two basic types of term life insurance policies—level term and decreasing term. Level term means that the death benefit stays the same throughout the duration of the policy. Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term. In 2003, virtually all (97 percent) of the term life insurance bought was level term. For more on the different types of term life insurance, click here . Whole Life/Permanent Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type. In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy.

The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people. By law, when these “overpayments” reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy. In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance. For more on the different types of whole life/permanent insurance, click here . Understand the different types of Life insurance.

All types from Term, Whole, Universal, and Variable Life insurance Life Insurance 101 We are going to explore the basic types of life insurance... Term Life is affordable, temporary coverage. There are term policies that can be converted (keep in mind that in most cases your premium will increase) to permanent policies once your financial circumstances change. Term life insurance policies are policies that provide affordable, temporary coverage. Term policies contain no cash value, are designed for pure protection, and are particularly suitable... For protection against outstanding loans and debts for which family members or others may be responsible; For families who feel they cannot currently afford a permanent policy but who need to protect their children from financial hardship due to the potential loss of a parent. To guard against uninsurability in the future: If you buy term insurance now, you can continue this coverage even if you become uninsurable. To provide coverage on other family members To protect key people of a business in its formative years of growth To purchase time _ time to increase your earnings so that the coverage can be converted to a permanent cash value life insurance policy without evidence of insurability In addition to providing necessary coverage at an affordable rate, Term life insurance protects your insurability.

By buying a convertible Term policy now, you can convert your policy to a permanent life insurance policy without providing evidence of insurability _ even if your health tomorrow is not as good as it is today. Whole Life provides the security of level premiums and guaranteed coverage. Whole Life is the traditional form of permanent life insurance. It provides... the certainty of level premiums; a guaranteed interest rate; and a guaranteed death benefit. An ideal product for the young and the old, Whole Life provides the extra security of guaranteed protection at affordable rates, yet it maintains the element of cash value accumulation for pre- and post-retirement needs. Current forms of Whole Life insurance enable policyowners to benefit from favorable experience and a strong economy by crediting excess interest to the policy. These "interest-sensitive" Whole Life policies are popular with individuals who value strong underlying guarantees but don't want to miss out on the opportunity for increased cash-value performance. Like all forms of permanent life insurance, Whole Life may be converted into retirement income. When you reach retirement, you can use loans and withdrawals from the policy's cash value to purchase an annuity that can provide additional funds for your retirement needs*.

Universal Life provides you with what you want with Whole Life coverage with the flexibility of adjusting your premiums and death benefits.. Universal Life is a flexible premium, adjustable life insurance product that provides you with the flexibility of choosing the policy features that are appropriate for you and adjusting those features as your financial priorities and needs change. When you are in the formative years of raising a family, for example, you can increase your policy's death benefit for extra needed protection. When a child reaches the age of higher education, you can borrow or withdraw from the cash value of the policy to help you pay college expenses*. When your family obligations are reduced, you can decrease your death benefit or increase your premiums up to specified maximums to build a cash value that can help you enjoy a retirement with dignity Indexed Universal Life gives you the death benefit and guarantees of life insurance, combined with the opportunity to earn interest linked to the upward movement of a stock market index (without the risk of investing directly in the market), you may wish to consider indexed life insurance. Like all universal life insurance, Indexed Universal Life allows you to choose the policy features that are most appropriate for you and to adjust those features as your financial priorities and needs change. It offers...

A death benefit paid to your loved ones generally free from federal income taxes.1 The flexibility to determine the amount and timing of premium payments. The flexibility to increase or decrease the face amount after issue.2 The flexibility of tax-deferred growth of policy cash values, which may be used to pay for monthly costs of insurance or accessed via policy loans and withdrawals to use as you wish. Unlike other interest-earning life insurance policies, however, Indexed Universal Life offers interest linked to a stock market index – without the risk of investing directly in the market. Variable Life allows you to try the investment market, there's Variable Life Insurance which provides a death benefit and the opportunity for you to invest your premiums in various Separate Account investment portfolios. In addition to offering you this flexibility, however, Variable Universal Life allows you to invest in a number of Separate Account investment portfolios. You, not the insurance company, decide how you want your premiums allocated; You can reduce risk by spreading your money among a number of Separate Account investment portfolios; and You can choose the investment options that most closely match your tolerance for risk and your financial goals. Unless you the client have a complete understanding of the mechanical parts of a Variable Life Insurance policy we encourage you to perhaps consider another solution to you situation.

We provide best quality services Phone is answered 24 hours Let us help you find the answers © Senior Care of Texas 1999-2016 "All rights reserved" 3 types of permanent life insurance 3 types of permanent life insurance See all stories Â» No one has ever claimed that life insurance is easy to understand. Term insurance is the most straightforward, offering the purest protection relatively inexpensively for people in most stages of life . But some cases, it may make sense to pay for permanent insurance, which is far more expensive and complex. If you're considering purchasing a policy, it's a good idea to know what you're getting into. Here is an introduction to the three main types of permanent insurance: whole life, universal and variable life. Whole life Whole life insurance is the most basic type of permanent insurance. It has a savings component and a death benefit. The savings component is called the cash value. "Whole life is more expensive than term insurance, but it has more built-in guarantees with regard to your death benefit -- the guarantee of a cash value at a future date.

Because of all those guarantees, you have a higher ongoing cost or premium," says Russell Fox, a Certified Financial Planner with Apex Wealth Management Group in Oxnard, Calif. Universal life insurance "Universal life insurance is a blend between whole life and term. It does have cash value accumulation, and it can be tied to a fixed interest rate like a CD that will adjust annually," says Fox. Because it has an investment component, universal life is a more aggressive approach than whole life, but it generally offers fewer guarantees than whole life. Because of that, it can be less expensive. Universal life offers consumers some flexibility in the amount they pay toward the premium, and they can also use the savings portion toward paying for the insurance coverage. Variable life insurance A third main type of permanent life insurance, variable life insurance, offers life insurance protection for the duration of your life with more investment options, including equities. Its structure is like that of universal life, but the value of your policy can go up or down with the value of the underlying investment choices. After a particularly brutal bear market, like the most recent one, these types of policies look extremely unattractive.

"You can end up in a double negative situation, where your investments are losing money and the cash value is being eroded by premium payments. Without adding more money on top, the policy could lapse," says Fox. "You do have permanent coverage for the rest of your life, as long as you keep the policy with an adequate amount of cash value in it. Then it can stay in force for the rest of your lifetime. You have to consistently monitor it and review it to make sure that it is still on track and a healthy plan," he says. What is a: Whole, Universal, Term Life Insurance Policy? ZIP CODE: Q. What is a whole life insurance policy? A. Explanation: A whole life insurance policy is a policy that pays a benefit to a beneficiary in the event of your death. It is called “whole life” because you usually pay the premium your whole life, and the benefit covers you until either you die or the policy matures. If the policy matures (called endowing) during your life time, the company will give you a check for the entire face value of the policy.

Most current whole life policies mature at age 100 although with the newer policies, you do not have to take the money until age 100. However, you pay no additional premium once the policy has matured. In addition to covering you for your entire life, a whole life policy builds cash value which can be used as emergency funds, converted into an annuity later in life, or simply surrendered for the cash. A whole life policy is the most secure type of policy you can buy, although it is also the most expensive. Q. What is term life insurance A. A term policy is the least expensive life insurance during the period of the term. The insurance covers you for a set time period which could be 5, 10, 15, or 20 years. A few companies still offer a thirty year term if you are fairly young. The premium on a term policy will remain unchanged during the term, as will the death benefit. Because you are only paying the cost of insurance and fees, the premium is very low. When the term expires, you have the option of converting the policy to some other form of insurance or of renewing it.

However, the renewal fees are extremely high—often as much as 300% or more, and they keep increasing every year after the initial Term. Term insurance is not intended to be a life long plan, but it can be a good way to go if you need to protect a mortgage or other debt, or need to make sure a family will be taken care of. In later years when the children are grown, you may not need the high face value of the term policy. Q. What is universal life insurance? A. Universal Life Insurance blends the features of Term and whole life for a policy that can last your entire life but will be less expensive than whole life. The interest which the policy earns is based on the economic criteria which can vary from year to year. The policy earns cash value, is available in high face amounts like Term and Whole Life, and is flexible. That is, you can change the premium or the face value as your needs change. If you want to save money but still have lifelong protection, Universal is an excellent choice. Q. What is no load life insurance? A. Part of the cost of life insurance is the annual fees.

These fees pay commissions to the agents along with the cost of advertising, creating the policies and other administrative costs of the company. With some companies, the fees are front loaded, meaning a higher percentage of your premium is used to pay fees in the first year of the policy. For people who understand insurance, one way to save on the fees is to purchase no-load insurance. The fees are thus minimized and your premium is not used to pay commissions to the agent. In some cases, you pay the agent directly for services rendered. In others, you simply purchase the insurance on your own either through the mail or through telemarketing. A word of caution: not all policies that come to you in the mail or no-load. Also, many mail order policies have fine print clauses that the average person does not understand. Q. What type of life insurance is best for me? A. The only way to know what type of insurance is best for you is to analyze your own situation and finances. If you have current debt, but are also putting money into a retirement plan or other investments, you may not need as much insurance later in life.

However, if you want to leave a legacy to family members or to a charity, or if you want assets that can increase your retirement income, you should consider either a whole life or a universal. Finally, although today’s Universal policies are very safe, if you want the security of something that is guaranteed to remain unchanged during your life time, your choice would be a whole life. A final word: Life insurance, even with the best companies, is often confusing with language the average person never learned in school. Unless you are doing little more than purchasing a burial policy, you should always work with a licensed agent. You are much less likely to be disappointed because the agent has a legal responsibility to made sure you understand the policy and to ascertain that it meets your needs. AccuLifeInsurance.com What is Life Insurance? - Life Insurance Basics - Fidelity What Is Life Insurance? Determining Your Coverage Need What Is Life Insurance? New to buying life insurance? Learn how it works and what you need to understand to choose your coverage. A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured's death.

Typically, life insurance is chosen based on the needs and goals of the owner. Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free.1 There are many varieties of life insurance. Some of the more common types are discussed below. Term life insurance Term life insurance is designed to provide financial protection for a specific period of time, such as 10 or 20 years. With traditional term insurance, the premium payment amount stays the same for the coverage period you select. After that period, policies may offer continued coverage, usually at a substantially higher premium payment rate. Term life insurance is generally less expensive than permanent life insurance. Needs it helps meet: Term life insurance proceeds can be used to replace lost potential income during working years. This can provide a safety net for your beneficiaries and can also help ensure the family's financial goals will still be met—goals like paying off a mortgage, keeping a business running, and paying for college.

It's important to note that, although term life can be used to replace lost potential income, life insurance benefits are paid at one time in a lump sum, not in regular payments like paychecks. Universal life insurance Universal life insurance is a type of permanent life insurance designed to provide lifetime coverage. Unlike whole life insurance, universal life insurance policies are flexible and may allow you to raise or lower your premium payment or coverage amounts throughout your lifetime. Additionally, due to its lifetime coverage, universal life typically has higher premium payments than term. Needs it helps meet: Universal life insurance is most often used as part of a flexible estate planning strategy to help preserve wealth to be transferred to beneficiaries. Another common use is long term income replacement, where the need extends beyond working years. Some universal life insurance product designs focus on providing both death benefit coverage and building cash value while others focus on providing guaranteed death benefit coverage. Whole life insurance Whole life insurance is a type of permanent life insurance designed to provide lifetime coverage. Because of the lifetime coverage period, whole life usually has higher premium payments than term life. Policy premium payments are typically fixed, and, unlike term, whole life has a cash value, which functions as a savings component and may accumulate tax-deferred over time.

Needs it helps meet: Whole life can be used as an estate planning tool to help preserve the wealth you plan to transfer to your beneficiaries. Comparing Types of Life Insurance Term Life Yes, Universal Life Insurance , primarily focused on death benefit protection No, traditional Whole Life Insurance is not currently offered How cost is determined Insurers use rate classes, or risk-related categories, to determine your premium payments; these categories don't, however, affect the length or amount of coverage. Your rate class is determined by a number of factors, including overall health, family medical history and your lifestyle. Tobacco use, for example, would increase risk and, therefore cause your premium payment to be higher than that of someone who doesn't use tobacco. Next step Learn strategies for choosing the right amount of coverage. To buy or learn more Understand the Different Types of Life Insurance Life Insurance Understand Life Insurance Life can be confusing and complicated at times. And buying life insurance can be one of those times-but it doesn't need to be. Understanding the different types of life insurance can be easier than you think once you take advantage of the resources available to you.

NetQuote can help you learn about the pros and cons of each type of life insurance, from whole life insurance to term life insurance, and the variances within each type. You can then understand how policy rates vary , and what type of insurance is designed for each type of individual and their circumstances. Do you need life insurance? Your personal situation will determine your life insurance needs. If you have no dependents, you probably don't need life insurance. If you have a family but don't generate a significant percentage of your family's income, you may not need life insurance. RELATED: Understand Accidental Death Life Insurance However, you have to think of the costs that will be associated with taking care of your children if you do pass (ie. additional day care, nannies, etc). If your salary is important to supporting your family, life insurance plays an important role in ensuring that the financial obligations are covered in the event of your death. How much life insurance do I need? There are a lot of factors that play into how much life insurance you'll need. The amount of life insurance you need depends on factors such as your other sources of income, how many dependents you have, your debts, and your lifestyle.

The general guideline is between five and ten times your annual salary. What type of life insurance should I buy? Term Life The term versus whole life insurance debate continues. Some experts say that if you're less than 40 years old and don't have a family disposition for a life threatening illness, go for term insurance, which offers a death benefit but no cash value. Term Life Insurance Quotes Whole Life In this more traditional life insurance policy, the premiums stay the same over the life of the policy, which stays in effect until your death, even after you've paid all the premiums. A cash reserve is built up, but you have no control over how it's invested. Whole life offers both a death benefit and cash value, but is much more expensive. Some of the money you put into a whole life policy goes towards a savings program, which then earns interest or is put towards other investments. In the end, a whole life policy that's been in effect for 25 years will provide a much larger benefit than a term policy. Whole Life Insurance Explained Variable Life Variable life insurance policies are the most expensive because they build up a cash reserve that you can invest in any of the choices offered by the insurance company.

The value of your cash reserve depends on how well those investments are doing. In a period of economic growth, your investment can grow quickly. Because these policies are dependent on the stock market, you can lose value as quickly as you gain. Universal Life This is a flexible policy which features both term and whole life. You can vary the amount of your premium with universal life insurance policies by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of the death benefit. For this flexibility, you'll pay higher administrative fees. However, the premium I usually inexpensive compared to whole life, but higher than term life insurance. Universal Life Insurance How much should life insurance cost? A healthy 30 year-old man could expect to pay approximately $300 a year for $300,000 of term life insurance. To receive the same amount of coverage under a cash value policy would cost over $3,000. Life Insurance Quotes Whether you're new to life insurance or are reevaluating your current life insurance policy, it's smart to stay informed. This empowers you with confidence that you have the right life insurance policy to protect your family, one that fits your needs and budget.

See how easy it is to shop online for life insurance. Get your free life insurance quotes today! Get Life Insurance Quotes Now Currently Insured? Life Insurance Policy Comparison - Nationwide Nationwide Call to find a financial advisor: 1-877-245-0761 Life insurance comparison from Nationwide There are a variety of life insurance products designed to meet different needs. Compare life insurance policies below to find a type of life insurance with the features and characteristics you’re looking for. Life insurance comparison chart Yes Yes Still not sure what you need? Let us help you find out which type of life insurance may be right for you . 1 Access to your money – This assumes that the contract qualifies as life insurance under section 7702 of the Internal Revenue Code (IRC) and is not a modified endowment contract (MEC) under section 7702A. Most distributions are taxed on a first-in/first-out basis as long as the contract meets non-MEC definitions under section 7702A. Loans and partial withdrawals from a MEC generally are taxable and, if taken prior to age 59½, may be subject to a 10% tax penalty.

2 Flexible payments – This assumes there is sufficient cash value to cover monthly policy charges. Keep in mind that variable universal life insurance has market volatility so it’s possible that you may need to pay an additional premium on your policy. Read this important information Your life insurance coverage needs may change if your personal situation changes. For example, if you get married, have a child or get a promotion, you may want to increase your coverage. Make sure that these strategies and products are suitable for your long-term life insurance needs. Also, make sure you are able to continue premium payments so your policy doesn’t lapse if the market declines. If you take a loan, withdrawal or partial or whole surrender your death benefit may be reduced, your policy may lapse or you may face tax consequences. There are fees and charges for variable life insurance coverage, including a cost of insurance based on characteristics of the insured person, such as gender, health and age. There may also be underlying fund charges and expenses, and additional charges for riders that customize a policy to fit your individual needs. Investing involves risks, including possible loss of principal. Neither Nationwide nor its representatives give legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.

Guarantees and protections are subject to Nationwide's claims-paying ability. They don't apply to the investment performance or safety of the underlying investment options. Variable products are sold by prospectus. Both the product prospectus and underlying fund prospectuses can be obtained by writing to Nationwide Life Insurance Company, P.O. Box 182021, Columbus, OH 43218-2021. Before investing, you should read the prospectus carefully and consider investment objectives, risks, charges and expenses. The product prospectus and underlying fund prospectus contain this and other important information. Investment products offered are not FDIC-insured, may lose value, have no bank guarantee. Share Article Contact Us Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value Life and annuity products are issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Company, Columbus, Ohio. The general distributor for variable products is Nationwide Investment Services Corporation, member FINRA . The Nationwide Retirement Institute is a division of NISC. Nationwide Funds distributed by Nationwide Fund Distributors, LLC, Member FINRA , Columbus, OH.

Nationwide Life Insurance Company, Nationwide Life and Annuity Company, Nationwide Investment Services Corporation, and Nationwide Fund Distributors are separate but affiliated companies. The Nationwide Group Retirement Series includes unregistered group fixed and variable annuities issued by Nationwide Life Insurance Company. It also includes trust programs and trust services offered by Nationwide Trust Company, FSB a division of Nationwide Bank®. Nationwide, the Nationwide N and Eagle, The Nationwide Retirement Institute, Nationwide is on your side and Nationwide Funds Group are service marks of Nationwide Mutual Insurance Company. Let's Face it Together is a service mark of Nationwide Life Insurance Company. ©2016 Nationwide Mutual Insurance Company and affiliated companies Term vs. whole life vs. universal vs. variable - what is the best type of life insurance to have? YOU ASK: Term vs. whole life vs. universal vs. variable - what is the best type of life insurance to have? WE ANSWER: To answer this question let us first examine those 4 types of life insurance with their pros and cons and who they are suitable for. Term Life Insurance This type is considered the simplest to understand among the general categories of life insurance policies. The word 'term' refers to the time period that the insured has insurance coverage.

The appeal of this type of life insurance has to do with its low cost while still offering the consumer sufficient coverage. Term Life Insurance Advantages – these policies come cheaper compared to whole, variable and universal policies. Because they offer coverage over a specific time period, a consumer can purchase just enough to cover his or her needs. For instance, a consumer can buy a term that is enough to cover mortgage payments. Term Life Insurance Disadvantages – does not have cash value. Premium payments are solely for insurance coverage and does not earn nor accumulate interest. The term itself can be a disadvantage. For instance, a consumer buys a 20-year policy. After the 20-year period, he decides he wants an extension of the coverage. By that time he would be required to show proof that he is still insurable. Failure to do so may lead the company to deny him the extension or it may grant him that but at a much higher cost. Whole Life Whole life offers entire life coverage to the insured as long as he meets the premium payments in a timely manner. Premium rates are higher than term policies especially at the beginning of coverage, but these tend to go down later on. In certain cases, term life policies can be converted to whole life policies.

Whole life policies have a cash value feature which offers potential for tax-deferred growth. Whole Life Advantages – Premium payments, death benefit and interest rates are guaranteed. The accumulated cash value grows under a tax-deferred status. The policyholder can withdraw or borrow against the cash value component. Whole life insurance is also accepted as loan collateral by many banks. Whole Life Disadvantages – Can be much more expensive compared to term as well as universal life insurance. The cost difference is brought about by the additional guarantees this policy type offers. Whole life policies are also known for not being flexible. The policyholder cannot increase his or her coverage by increasing or decreasing his premium amounts. Also, the rate of interest you get are usually lower compared to other investment vehicles. Universal Life Universal life is similar to a whole life policy but offers flexibility in relation to the savings component of whole life. The insurance carrier will set aside part of the premiums for investment. The company will guarantee a minimum return and the funds will be afforded tax-deferred status. The flexibility feature comes in the choice of death benefit – it can either be a pay out of the cash value, or, it can be face value of the policy plus accumulated cash value.

Choice number one costs less as the provider will make a lesser payout. Choice two costs more because of the higher payout. Universal Life Advantages – The flexibility feature allows the policyholder to defer premium payments by using the cash value to cover the payments. The death benefits can also increased or decreased. Loans are allowed against the policy. Disadvantages of Universal Life – Costs more than term life policies. The rates of return are not be best available to the policyholder; other forms of investments can offer better rates. Variable Universal Life Insurance This type of life insurance is a mix between life insurance and an investment account. The variable feature comes in when the policyholder gets to decide how much of the premium will be allocated for investment purposes. This policy is considered partly an investment. Hence, SEC regulations are applied and policyholders are to be provided with a prospectus. Variable Universal Life Advantages – the growth in funds is tax-free. There is a guarantee on the minimum amount for death benefits for as long as the minimum premium payments are made. It also allows flexibility in investing decisions. Making wise decisions can lead to significant earnings that are tax-deferred. Variable Life Disadvantages – Bad market performance can impact the investment portion of the policy.

A decrease in the policy's value can lead to additional premium payments. Expenses related to the investment aspect of the policy can be much higher than that of other types of investment vehicles. Which type of insurance is most suitable for you? Who is term life insurance for? Who is whole life insurance for? Who is universal life insurance for? Who is variable universal life insurance for? Suitable for those who are looking for temporary coverage over a specified time period and those who have a tight budget. Can be a great choice for those looking for permanent protection at fixed premium payments. The fixed amount means there is a guarantee that it will not increase during the policy term. Suitable for those who want to accumulate cash value while having flexibility with the premiums and the death benefit. The flexibility feature allows a consumer to have a policy that is modified to fit his or her specific objectives. Best suited for those who have maximized their 401(k)s and similar retirement plans. Also recommended for those who intend to hold it for life. Consumers considering term insurance and a variable annuity may be better off with a VUL. Which life insurance policy is better for long term? There is no single answer that can address every consumer's long term coverage needs.

An individual has to assess his situation and consider his goals for overall financial planning, his economic value to his loved ones and his plans for his surviving family. Generally, the step involves calculating one's economic value, which is the value of future earnings over the individual's lifetime. To do this, one has to consider current and future earnings, the number of years one plans to continue working until reaching retirement, the expected rate of return on one's assets and investments, and the economic value that one looks to serve as replacement in the event of death. Figuring this out may require the guidance of a trusted life insurance agent. What is the best type of life insurance for young people? Term life insurance is best for young people who have no dependents. These are individuals who have less than 20 years to go until they reach their 30th birthday. Getting a term policy which carries an option for renewal or conversion is also recommended. What is the best type of life insurance with investment value? It would depend on one's current situation and future financial goals. If you want growth that follows a set schedule where you are aware of the cash value of the policy each year, then go for whole life coverage.

If you are looking for a policy that offers a fixed rate of interest or one that will never go below a certain rate, then the universal life policy may serve you best. If you want the most opportunity for growth, the variable universal life policy will offer you a chance to be tied to stock market performance. As your investments grow with the market, your policy's cash value will also see growth. Was this question and its answer useful? Not a bit

Question: Whole, Universal, and Term are all types of what?
Answer: Life Insurance